CMS seeks to expand hospital quality incentives
Agency makes use of new ability to use IPPS
The Centers for Medicare & Medicaid Services (CMS) has proposed changes that would update payment policies and rates under the hospital inpatient prospective payment system (IPPS) for fiscal year 2009, cutting payments for hospital-acquired conditions or medical errors and giving hospitals financial incentives to meet quality criteria.
The proposed changes would affect some 3,500 acute care hospitals in the United States, beginning with discharges that occur on or after Oct. 1, 2008.
CMS seeks to expand the list of conditions that it says are "reasonably preventable through proper care" – and thus, for which Medicare will pay at a lower rate if the patient acquires them during a hospital stay.
Although the IPPS has always been aimed at rewarding hospitals for efficiency by making single payments based on average costs of treating a patient with a particular diagnosis (thereby rewarding hospitals whose efficiency allows them to incur lower costs for the diagnosis), Medicare until recently didn't have the legal authority to use the payment system as a "carrot or a stick" to encourage hospitals to improve quality.
According to health care attorney Carolyn Jacoby Gabbay, Esq., partner in the Boston office of the firm Peabody Nixon LLP, the change is part of CMS's progression toward eliminating payments for medical errors and hospital-acquired conditions, and restricting payments for secondary conditions that cause patients to be assigned to higher diagnosis-related groups (DRGs).
"CMS is beginning the process of eliminating payments for hospital mistakes and hospital-acquired conditions and infections," Gabbay wrote in 2007. "The Deficit Reduction Act of 2005 [DRA] required hospitals to report secondary conditions that are present at the time of admission.... DRA required the HHS Secretary to identify a minimum of two conditions that (a) are high cost and/or high volume, (b) cause patients to be assigned to higher DRGs when they are present as a secondary diagnosis, and (c) are reasonably preventable."
Starting in federal FY 2009, Gabbay explains, these cases will be paid at the higher medical severity DRG (MS-DRG) level only if the condition was present upon admission.
Quality measures added
CMS is adding 43 new quality measures for which hospitals will have to report data in order to receive the full annual payment update for their services.
In addition to giving hospitals a financial incentive to improve the quality of their services, the hospital reporting initiative provides CMS with data to help consumers make more informed decisions about their health care.
Besides the proposed 43 new measures CMS seeks to add for the FY 2009 reporting period, it plans to retire one existing measure. However, for some of the new measures, the hospitals will not have to affirmatively report data to CMS. Instead, CMS will calculate them from administrative data. If the proposals are adopted, the total number of measures for reporting for FY 2010 would be 72.
Among the new measures are those relative to hospital re-admissions for three conditions – pneumonia, heart attack, and heart failure. Re-admissions cost Medicare $15 billion annually, CMS states, with $12 billion of those costs potentially preventable. Almost 18% of Medicare patients are re-admitted within 30 days of discharge, according to CMS.
CMS expects to issue a final rule on or before August 1, 2008.
Sources
For more information, contact:
- Carolyn Jacoby Gabbay, Esq., Partner, Nixon Peabody LLP, 100 Summer Street, Boston, MA. Email: [email protected]. "CMS Proposes IPPS Overhaul for FY 2008," available at www.nixonpeabody.com/publications_detail3.asp?ID=1811.
- Centers for Medicare & Medicaid Services. Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2009. Available at www.cms.hhs.gov/AcuteInpatientPPS/IPPS/list.asp?listpage=4.
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